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ACCC appeal lifts hopes for Newcastle container port

Grain Central, July 28, 2021

An artist’s impression of a berth at the proposed container terminal at Mayfield looking east over Kooragang Island. Image: Port of Newcastle

THE Australian Competition & Consumer Commission (ACCC) has lodged an appeal in response to the Federal Court decision which dismissed the ACCC’s proceedings against NSW Ports.

The Federal Court decision was a setback for plans by Mayfield Development Corporation (MDC) to build a container terminal at the Port of Newcastle (PON).

In principle, the planned terminal is being supported by exporters of grain, pulses, cotton and meat produced in northern and central New South Wales who regularly encounter logistics issues when shipping out of Sydney’s Port Botany.

Handed down last month, the Federal Court decision stated NSW Ports was not subject to competition laws because it had “derivative crown immunity”, and that Port Commitment Deeds did not have an anti-competitive purpose or effect.

“We are appealing from this decision because we consider that the purpose and likely effect of the compensation provisions entered into at the time the State of NSW privatised the Ports of Botany and Kembla was anti-competitive,” ACCC chair Rod Sims said.

“Agreements entered into when existing State-owned monopoly businesses are being privatised, which seek to maximise profit from the sale by protecting that monopoly from competition in the future, are inherently anti-competitive.”

“We remain concerned that the Port Commitment Deeds will effectively hinder or prevent the development of a competing container terminal at the Port of Newcastle for 50 years.

“This is a matter of significance for the Australian economy.”

PON welcomes news

The Federal Court decision was a setback for plans to build a container terminal at the Port of Newcastle, and its CEO Craig Carmody yesterday welcomed news of the appeal.

“Development of another container terminal in NSW, even whilst Port Botany still has capacity, would provide a viable alternative and more cost-effective export routes for regional NSW farmers and manufacturers,” Mr Carmody said.

“Such competition would increase regional NSW global competitiveness and allow these suppliers to avoid congested supply chains.”

“Port of Newcastle is confident that it has the ability to compete in the same market as Port Botany.”

The Port Commitment Deeds were entered into as part of the privatisation of Port Botany and Port Kembla by the NSW Government in 2013 for a term of 50 years.

They oblige the State of NSW to compensate the operators of Port Botany and Port Kembla if PON container traffic exceeds a specified cap at a rate equivalent to the wharfage fee the port operators would receive if they handled the containers.

Another 50-year deed, signed in 2014 requires PON to reimburse the State of NSW for any compensation paid to operators of Port Botany and Port Kembla under the Botany and Kembla Port Commitment Deeds.

The ACCC has said this reimbursement would significantly increase the cost of moving a container through Newcastle.

Deeds called anti-competitive

Mr Sims said the ACCC will argue the Federal Court made an error in finding that the Port Commitment Deeds did not have an anti-competitive purpose.

This is despite the court finding that the purpose of the deeds was to secure a higher sale price for the State of NSW from selling the existing monopoly of Port Botany, and ensuring that NSW Ports would retain the full value of that monopoly.

The Court also claimed the development of a PON container terminal was “fanciful” or a “speculative possibility” when the agreements were made.

“The ACCC’s case is that there was always a meaningful possibility that some time over the 50-year period a container terminal would be developed at the Port of Newcastle, if not for the compensation provisions.

“These provisions in the Port Commitment Deeds increased the barriers to the development of such a terminal, and this is anti-competitive,” Mr Sims said.

Crown immunity protects state governments from the operation of competition laws when they are not carrying on a business.

When this immunity extends to parties that contract with state governments in certain limited circumstances, it is known as “derivate crown immunity”.

The ACCC in 2018 instituted proceedings against NSW Ports and in 2019, NSW Ports made a cross claim against the State of NSW and the PON entities, joining them to the ACCC’s proceedings.

NSW Ports operates Port Botany and Port Kembla under 99-year leases from the State of NSW.

The compensation to be paid by the State of NSW under the Port Commitment Deeds to the operators of Port Botany and Port Kembla.

Container traffic through PON has not yet exceeded the specified cap, and therefore to date no payments have been made by the State of NSW.

Release of the Federal Court findings in relation to the ACCC’s case against NSW Ports has also drawn a response from MDC, which is suing NSW Ports for anti-competitive behaviour around the proposed Newcastle development.

MDC launched a restrictive trade practices action alleging anti-competitive behaviour against NSW Ports in 2018, but the proceedings were stayed in August 2019 pending the outcome of the ACCC case.

MDC director Captain Richard Setchell said that while the consortium was still reviewing the reasons for judgement in ACCC v NSW Ports, the ruling in no way impacts on its case.

“The published reasons were arrived at without any evidence being presented by MDC in relation to our claim, such evidence we are confident will prove anti-competitive behaviour by NSW Ports.”

Captain Setchell said any inference arising out of the court’s decision that MDC was not a serious investor was difficult to understand or accept.

“The undisputable facts are that MDC responded to an officially approved public tender process and was selected as the preferred developer.

“We satisfied all the tender requirements, including the obligation to develop a dedicated container terminal with an annual capacity of 1 million TEUs per annum.

“MDC demonstrated financial capacity to fund the $650 million development and had finalised and signed all contractual documents negotiated over the four-year tender period.

Captain Setchell said he was perplexed to hear 20 years of strategic planning by NPC in line with the NSW Government’s Ports Growth Plan, a public tender, and four years of negotiation with all
agreements ready for execution described as ‘unconnected to reality’.

Captain Setchell is a director of Anglo Ports, the minority stakeholder in MDC, with Danish shipping giant Maersk’s APM Terminals the majority shareholder.

“MDC never requested assistance from Government to develop the multi-purpose cargo facility and all costs and risks were from the private sector.”

MDC intends to continue the pursuit of its claim against NSW Ports in the Federal Court and is currently considering legal advice regarding the next steps, given the terms of the court-imposed stay.

Source: ACCC, Port of Newcastle, MDC

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